McDonald’s Withdraws from Iceland

The three McDonald’s outlets operating in Iceland are going to close shop, victims of the collapse in the value of Iceland’s currency.Subway, Reykjavik, Iceland (my photo, available under cc license)
When I was in Nizhny Novgorod in 1998 when Russia defaulted on its debt, I remember a McDonald’s guy explaining to me that the company tried, when feasible, to make sure that expenses and purchases were happening in the same country. So you buy Russian potatoes with rubles and sell french fries in Russian cities for rubles. Icelandic agriculture isn’t going to be able to work as a McDonald’s supplier (great butter, though) so presumably they were importing tons of stuff and thus exposed to a great deal of currency risk. Perhaps if Iceland joins the EU and adopts the Euro, they’ll get their McDonald’s back.
Meanwhile, I wonder about other fast food outlets. The American fast food chain I went to in Iceland was Subway. Are they still there?

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Financial textbooks tells us that the major stumbling blocks for equity performance are typically depressed corporate earnings growth, subdued GDP growth, elevated interest rates, fear of deflation and demand contraction. However, if history is any guide, the longest period of underperformance/steep erosion in value of any equity is triggered if a country is faced with debt default (though there are limited such cases in history). Equity indices of countries such as Iceland, Ukraine, Russia and Thailand have fallen by nearly 85-90% after they defaulted on debt payments.

McDonald’s Corp.’s Japan business said Wednesday a human tooth was found in fries, and plastics in chicken nuggets and sundae, in a series of food-safety issues that happened in the past six months.
The affected nuggets, supplied by Cargill Inc.’s Thai unit, were sold at two outlets in Japan, including one in Tokyo, according to spokesman Takashi Hasegawa. The fast-food chain is seeking new nugget suppliers including in Brazil, Hidehito Hishinuma, a director at the company, said at a briefing held in Tokyo today.

McDonald’s is to close its business in Iceland because the country’s financial crisis has made it too expensive to operate its franchise.
The fast food giant said its three outlets in the country would shut – and that it had no plans to return.
Besides the economy, McDonald’s blamed the “unique operational complexity” of doing business in an isolated nation with a population of just 300,000.
Iceland’s first McDonald’s restaurant opened in 1993.

REYKJAVIK, Iceland — Icelandic lawmakers introduced a proposal in Parliament on Thursday to grant immediate citizenship to National Security Agency leaker Edward Snowden, who admits to revealing key details of U.S. surveillance activities.
Ogmundur Jonasson, whose liberal Left-Green Party is backing the proposal along with the Pirate Party and Brighter Future Party, put the issue before the Judicial Affairs Committee, but the idea received minimal support.

Noisy crowds, long queues, and traffic jams plunged McDonald's restaurants in Iceland into a state of siege Saturday, as the chain served its final burgers on the island.Icelanders flooded the three branches of the US fast-food restaurant in Reykjavik several hours before the outlets shut for the last time, forced to close after the island's economic collapse caused running costs to soar.Extra staff were deployed to reinforce the outlets, whose disappearance after 16 years means Iceland will be one of the few Western countries without a presence of the ubiquitous eatery.

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